How Claims Service Cultivates Insurance for Trees, Landscapes

A seed that was planted when one of the owners discovered that a medium-sized tree on his property would cost as much as $10,000 to replace, and that there was not sufficient insurance for it, has blossomed into a national company that provides the data and claims services insurers need to underwrite trees, shrubs and landscapes.

Doug Cowles, president and CEO of Horticultural Asset Management, Inc., known as HMI, says the biggest barrier to the creation of insurance products for plant material used to be that there wasn’t a standardized replacement cost system.

So in 2003 HMI started building a database of wholesale base prices, a database that now has nearly one million price points. HMI has since added a network of certified arborists and licensed and insured tree crews— sort of a one-stop greenhouse for insurers and property owners interested in protecting against loss of trees and other landscape assets.

“Almost any property in the country has landscaping assets that are valuable. They need to be insured or maintained, and unfortunately, in some cases, they fail,” Cowles says in a podcast with Claims Journal in which he talks about landscape losses, landscape claims services and his own Cary, North Carolina company.

Property owners need to be able to properly document any landscape loss and insurers need to know how to price any replacement coverage.

The North Carolina firm says it is the only company in the U.S. that specializes in providing the insurance industry with comprehensive claims support for tree, shrub or turf damage and other landscape losses. Its services include emergency tree removals, debris removals, expert cause of loss analyses and replacement cost calculations.

HMI has developed software that identifies symptoms on a tree that may indicate a potential failure risk. Its treeFacts Reports provide guidance on plants that may require remedial services to protect against a loss of the plant and possible damage to a nearby structure or other asset.

From its inception, HMI has worked primarily on residential properties but Cowles says it is increasingly being asked about commercial properties, including nurseries, vineyards, municipalities and arboretums across the country. “They have spent a great deal investing in their landscaping, their horticultural assets, and maintaining those assets,” according to Cowles.

One recent client was a golf course, which was named after a specific type of tree. The clubhouse was ringed with mature species of this tree, until a fire in the clubhouse destroyed them. HMI was called in.

“So clearly, the golf course — that was their namesake — had to replace those trees,” he says.

HMI provided certification that, in fact, the trees were not salvageable. It documented the size of all the mature trees and then calculated the replacement cost.

There is a market for finding and transporting mature trees and transplanting them unto a property. “That’s something a lot of people don’t understand is that you can replace a mature tree. It can cost tens of thousands of dollars, $50,000 or $60,000 in some cases,” he says. “They have a very high success rate in doing transplantings of large trees.”

The golf course invested in mature replacement plants for eight or 10 large trees, Cowles recalls.

According to Cowles, the biggest cause of plant damage is windstorms, by far, and not just hurricanes but straight winds like the Santa Ana winds, microbursts and tornadoes. Even a thunderstorm can cause a great deal of damage. Wildfires, vandals and vehicles also cause damage.

When HMI was planting its roots, insurance coverage for these green property assets was hard to find. Even today, while homeowners policies cover damage caused by a fallen tree, they offer only limited coverage for tree removal and replacement. Standard commercial property insurance policies typically protect the structure but not the landscaping, which is not considered essential.

However, Cowles says the insurance picture is improving.

“Since HMI has been in business, about six residential insurers have developed landscape coverage. In some cases, they’ll go up to $200,000 per plant on a property. A growing number of the commercial carriers are also either expanding their coverage or creating new coverage,” he says.

The carriers offering some form of personal or commercial tree and shrub coverage or higher limits for these clients include Fireman’s Fund, Chartis (AIG) Private Client Group, Chubb and ACE Private Risk Services. Coverage is also available through national wholesalers Venture Insurance Programs, which has a program for golf courses, and Advanced AFG Risk Services.

The insurance industry is where HMI expects to grow.

“We’re pretty excited about our future. I think, primarily, we’re excited because there are more insurance options available to clients and customers who own landscape assets. As those products are made available to consumers, there’s a need to underwrite the insurance policy and inspect the trees that are being insured. Unfortunately, [also] the need to then adjust the claims when there is damage. We think that the need for both of those products is really going to grow. So we think that our growth is going to continue to come from the insurance community, primarily,” Cowles says.

Cowles says insurance agents should be looking at their clients’ landscaping for a number of reasons. Number one is that large trees near a home, while beautifying the property, could also present a potential risk.

“So it’s important that they [agents] discuss with the property owner whether there’s maintenance that’s been applied to those trees and whether they’ve been inspected,” he says.

According to the HMI CEO, the vast majority – 80 percent– of tree removals that his firm handles involve removing trees that had a pre-existing health condition. “Healthy trees, typically, don’t fail even in a strong windstorm,” he says.

Agents should also consider the value of any trees and the importance of the landscaping to the property itself.

The biggest source of dissatisfaction that HMI hears from its clients is that their insurance coverage does not provide for the replacement of their trees. He thinks some agents might not be aware that there is coverage out in the market today.

“That’s a big disappointment for a property owner who’s lost a specimen tree. They find the only coverage that they have is to remove it from their property, not to put anything back in its place,” he says.